anyone else want a CRASH...?

Sisyphus

fimonkey wrote:

Wow, I'm learning HEAPS about economies and house prices etc etc though still elementary level at teh moment. Can someone please explani to me what share prices have to do with house prices?

Overall, what do you think the percentage is of ppl who use these forums and those who think there'll be a crash. Is there a poll anywhere that show's ppl's opinions on either a) Rise, b) stagnate or c) crash?

Cheerio

The relationship between house prices and share prices is a tricky one. It's difficult to say if there is any clear correlation positive or negative. In theory both should perform well in a healthy growing economy with low interest rates. But investors often look at the two as alternatives - either or.
The current boom in house prices was particulary boosted after speculators were stung and lost confidence in shares after the dot-com bubble. Since 2003 shares have significantly outperformed property as they have done over longer periods like 25 or 30 years.
In Germany stock markets have correlated well to other international equity markets but their property market has stagnated for a decade.

Alan_M_2

Hereward wrote:

This raised the question of why do you want to own your own home? There are many hidden costs to property ownership that most people tend to ignore when they buy there first property, only to find that there expenses have increased.

As I have stated before, there is no right about having to own your own home, and many people would be better off renting than actually buying a property.

I'm someone whose better off renting at the moment. The money I have available that would be tied up in property I'm using to buy stock, so that money is working for me in a far more effecient way than if it were reducing my living costs.

I also Lease vehicles, I get quite a few people that tell me this is a waste of money and that I should buy, but it really depends what you're doing with the capital instead.

Say I lease a £20K van, the monthly payments are around the £350, in four years I've effectively paid for the vehicle then just hand it back.

But with the £20K I haven't Had tied up in the vehicle I bought stock, in year one I bought £20K in stock, this sold for £40K, In year two I buy £25K in stock selling for £50K by the time the lease is up and I need a new vehicle, the £20K I had tied up in it, could have increased 5 fold easily, negating any extra costs involved in the cost of the vehicle.

Now don't get me wrong, I'd love my own place, A Georgian house tree lined drive etc, but I'll worry about that closer to when I'm retiring than right now.

Hereward

sm9ai wrote:

It maybe selfish to want a crash, but its just as selfish to want them to rise.

The trouble is they have risen, and now it needs to be restored back to what it should be.

What happens is property prices are at the price they should be? Just becasue you belive something to be overvalued doen't mean that it is ,and vice versa.

ravenfield

Hereward wrote:

What happens is property prices are at the price they should be? Just becasue you belive something to be overvalued doen't mean that it is ,and vice versa.

then how would you know it's at the price it should have been?

Hereward

ravenfield wrote:

then how would you know it's at the price it should have been?

Any good or service is priced correctly if it sells at the stated price as a customer has deemed it to be priced fairly. This is not to say that another customer would consider it to be overpriced, or if the original buyer considered it to be underpriced.

ukbondraider

Alan_M wrote:

I'm someone whose better off renting at the moment. The money I have available that would be tied up in property I'm using to buy stock, so that money is working for me in a far more effecient way than if it were reducing my living costs.

I also Lease vehicles, I get quite a few people that tell me this is a waste of money and that I should buy, but it really depends what you're doing with the capital instead.

Say I lease a £20K van, the monthly payments are around the £350, in four years I've effectively paid for the vehicle then just hand it back.

But with the £20K I haven't Had tied up in the vehicle I bought stock, in year one I bought £20K in stock, this sold for £40K, In year two I buy £25K in stock selling for £50K by the time the lease is up and I need a new vehicle, the £20K I had tied up in it, could have increased 5 fold easily, negating any extra costs involved in the cost of the vehicle.

Now don't get me wrong, I'd love my own place, A Georgian house tree lined drive etc, but I'll worry about that closer to when I'm retiring than right now.

By stock are you referring to shares?

If so a 100% increase every year is a bit far fetched. When buying equity a 10-15% increase per yr is considered very good and even this is hard to sustain. Shares can also easily decrease in value.

Not sure if your calculations work.

As for a housing crash, this will only happen when no one can afford to buy. This will be evident by observing what is happening around you. I'm currently looking at my friends aged 25-28 and although they are first time buyers they are happily buying their 2 bed apartments for around £350K. I am looking at other people I know and although not as fortunate they all seem to be able to afford a house albeit a smaller one than they would have preferred. Interests rates are not going much higher so people rightly or wrongly can still stretch themselves. Everyone also seems to happy in their jobs and are generally spending alot socially aswell. i.e the economy seems relatively good. Now this does not seem to be changing and only until it does will we see any impact. Also the crash seen a decade ago will unlikely repeat itself as the Bank of England will never raise rates as high (as Warren Buffet will not be arbitraging the country again). The BOE have also learnt from their past mistakes so any downturn in the housing market will be engineered to be a soft one via interest rates.

What I guess needs changing is the mentality that everyone should be able to buy their own house regardless of their earnings. Life is hard but in the UK it is harder because here we always get shafted. Mind you in the UK we all expect to earn £100K as a toilet cleaner which is why the country is not as prosperous so I am not sure whos really to blame.

JHB205

Alan_M wrote:

This is an example of a phenomena that I've noticed increasingly over the last few years (and noticed increasingly on this forum).

There seems to be a great deal of resentment by the British towards anyone who does well for themsleves. I have a couple of friends who through hard work and long hours have got themselves into very good positions, enough to buy themselves nice cars, yet they've found they can't drive them anywhere as they'll get keyed or vandalised.

I'm not sure what this is, is it resentment or jealousy?

Go to America or any other developed nation, if you've earn't enough money to buy a Bentley or a Ferrari, people pat you on the back and congratulate you at your success, and the success it brings to the nation in all the people you employ and the taxes you pay.

What is it with the bitterness in the UK? I've never seen it so prevelant as it is now.

I don't really know the mindset of vandalism, or the national view point on wealthy people(i think if anything the nation is obsessed with the very weathly). I'm just trying to make the point that a home shouldn't be a business, at the moment the rich can afford to get richer by borrowing against current assets which is contributing to driving house prices up.
I'm not blaming anyone for taking advantage of this oppertunity, but i do think that the current situation is seen as unsatisfactry for people who want homes, not businesses.

Alan_M_2

ukbondraider wrote:

By stock are you referring to shares?

If so a 100% increase every year is a bit far fetched. When buying equity a 10-15% increase per yr is considered very good and even this is hard to sustain. Shares can also easily decrease in value.

Not sure if your calculations work.

As for a housing crash, this will only happen when no one can afford to buy. This will be evident by observing what is happening around you. I'm currently looking at my friends aged 25-28 and although they are first time buyers they are happily buying their 2 bed apartments for around £350K. I am looking at other people I know and although not as fortunate they all seem to be able to afford a house albeit a smaller one than they would have preferred. Interests rates are not going much higher so people rightly or wrongly can still stretch themselves. Everyone also seems to happy in their jobs and are generally spending alot socially aswell. i.e the economy seems relatively good. Now this does not seem to be changing and only until it does will we see any impact. Also the crash seen a decade ago will unlikely repeat itself as the Bank of England will never raise rates as high (as Warren Buffet will not be arbitraging the country again). The BOE have also learnt from their past mistakes so any downturn in the housing market will be engineered to be a soft one via interest rates.

What I guess needs changing is the mentality that everyone should be able to buy their own house regardless of their earnings. Life is hard but in the UK it is harder because here we always get shafted. Mind you in the UK we all expect to earn £100K as a toilet cleaner which is why the country is not as prosperous so I am not sure whos really to blame.

No you assumed incorrectly, I'm a stone importer, by stock I'm refering to worked Marble and Limestone (stock for my business), nothing to do with the stocks and shares.

I'm expanding my business, which over the last 24 months has increased by 125% per annum, and with the new contracts I have in place this year will be at least the same again.

My calculations are actually conservative for our current circumstances, at present I can't cope with demand, for each order I fulfill I'm turning away two more, but I can't risk expanding too fast and crippling the business from a cashflow perspective, that's why we're doubling every 12 months, any faster that that I risk creating my own bubble.

Due to the nature of the business, a reasonable proportion of my customers are property deveolpers, construction companies, commercial developers as well as retail outlets and direct to public (for larger orders). On a daily basis I deal with every level of business for the housing market.

I don't want to see a crash, but I think it will happen, however, It won't kill my business but it will change it, the developers will dissapear for a little while whilst they consolidate (this started happening about 9 months ago and is reflected in my sales) retail and domestic orders increase proportionately as people are finding they can't afford to move and are deciding to stay put and refurbish/improve their existing property.

In the interest in keeping figures simple in my earlier post on which you made incorrect assumptions, the £20K I don't have tied up in a vehicle may actually be recycled into stock 4 or 5 times throughout the year, effectively that £20K could earn me as much £40k-£60K in 12 months, it depends on the size and frequency of large orders we take (large being container quanitities).

sm9ai

Hereward wrote:

What happens is property prices are at the price they should be? Just becasue you belive something to be overvalued doen't mean that it is ,and vice versa.

True, but if a loaf of bread is 50% of your wages, then is it overpriced?

Well rich folk can afford it so it still sells. So therefore the bread is not overvalued?

roswell

lynzpower wrote:

Is there enough housing for all? At the right price and the right size & the right areas?

Id say no, there isnt. those at the bottom end of the ladder, there is massive amount of homelessness due to rising rents in london - HB wont pay it, so the LL evicts to get professional tenants in.

Id say YES there is enough housing for everyone, NO not all at the right place and not the right sizes and not the right area`s.

Price / location / size would have no beering on your need for housing if you were homesless and the sooner the UK public understand this the better, you dont see the occupans of shacks in africa complaining that its not the right size / place / price you find them greatfull that they have a roof over there heads and this is what I mean by homeless.

There is enough housing stock. after all if its not council owned its BTL if its not BTL its owned by a inidividual or company. It may not be the right place right size right colour but its somewhere to live.